Essay Instructions: This is the case to be analyze
WORLDCOM-MCI
Bernard Ebbers became very wealthy from the rising price of his holdings in WorldCom’s stock. However, shortly after the MCI acquisition in 1998, the telecommunications industry entered a downturn and WorldCom’s growth strategy suffered a serious blow when it was forced to abandon its proposed merger with Sprint in late 2000. By that time, WorldCom’s stock was declining and Ebbers came under increasing pressure from banks to cover margin calls on his WorldCom stock that was used to finance his other businesses ( Timber and yachting, among others). During 2001, Ebbers persuaded WorldCom’s board of directors to provide him corporate loans and guarantees in excess of $400 million to cover his margin calls. The board hoped that the loans would avert the need for Ebbers to sell substantial amounts of his WorldCom stock, as his doing so would put further downward pressure in the stock’s price. However, this strategy ultimately failed and Ebbers was ousted as CEO in April 2002 and replaced by John Sidgmore, former CEO of UUNET Technologies, Inc.
Beginning in 1999 and continuing through May 2002, the company (under the direction of Scott Sullivan(CFO), David Myers (controller) and Buford ”buddy” Yates (director of general accounting) used fraudulent accounting methods to mask its declining earnings by painting a false picture of financial growth and profitability to prop up the price of WorldCom’s stock.
The fraud was accomplished primarily in two ways:
1.- Underreporting “line cost” (interconnection expenses with other telecommunication companies) by capitalizing these costs on the balance sheet rather than properly expensing them.
2.-Inflating revenues with bogus accounting entries form “corporate unallocated revenue accounts”.
Eugene Morse, an internal auditor at WorldCom reporting to Cynthia N cooper, uncovered approximately $3.8 billion of the fraud in June 2002 during an examination of capital expenditures. Cynthia Cooper subsequently alerted the company’s new auditors, KPMG (who had replaced Arthur Andersen , WorldCom’s external auditors during the fraud) and the chairman of the audit committee, and she has been widely credited as having uncovered the fraud at WorldCom. Shortly thereafter, the company’s audit committee and board of directors were notified of the fraud and acted swiftly: Sullivan was fired , Myers resigned. Arthur Andersen withdrew its audit opinion for 2001, and the U.S. Securities and Exchange Commission (sec) launched an investigation into these matters on June 26,2002 (see accounting scandals). By the end of 2003, it was estimated that the company’s total assets had been inflated by around $11 billion.
Major players: Auditing Firm- Arthur Andersen, Bernard Ebbers
-------------------------------------------------------------SPECIFICATIONS ABOUT THE BODY OF THE PAPER
Developing a Case Study
1. Collecting data about the case.
The study undertaken for this course is to highlight failure of ethical behavior of Company CEOs. The collected data can start for the CEO coming to power at the Company and how over time their behavior became more erratic or cunning depending on your point of view. Data could result from a combination of methods, including documentation (applications, histories, records, etc.), questionnaires, interviews and observation.
2. Data is organized into an approach to highlight the focus of the study.
Data, for the purposes of this class, could be organized in a chronological order to portray how the decline of the CEO/Company came about. Discussion may include the results and consequences of unethical.
3. A case study narrative is developed.
The narrative is a highly readable story that integrates and summarizes key information around the focus of the case study. The narrative should be complete to the extent that it is the eyes and ears for an outside reader to understand what happened regarding the case.
4. Case studies might isolate any themes or patterns.
For the purposes of this course, the case studies deal with large Corporate entities. The analysis report could review the theme/pattern of unethical behavior, causes of unethical behavior, the results of the actions of the CEO, CIO, CFO, or other controlling officers.
The case study report could point out commonalities (i.e. personality traits) that led major players to engage in corrupt behavior. Discussion could also reference how the major player(s) was/were dealt (i.e. penalty, criminal liability, civil liability), or how the Company sought to prevent a reoccurrence of malfeasant behavior.
As with all assignments in which you are referring to someone else's writing, cite any sources used and format them according to the requirements of the APA style guide. This formatting includes, but is not limited to, the following guidelines:
? Margins - set to one inch
? Font - 12 pt. Times New Roman, no bold, or underline
? Title - center above the paper, 12 pt. font (Level A Heading), no bold, underline, or italics
? Pagination - every page; consists of a header containing a short title for the paper and page number placed in the upper right corner of the page
? Line Spacing - double space all work including the References Page.
? Point-of-View - third person, objective; limit perspective to research; no personal opinion or narrative
? In-text citations - must conform to APA requirements
? References list - must conform to APA requirements
This assignment is worth more then any other individual assignment. You must format your paper in APA style and must document your sources in APA format. You must discuss the chosen topic with the following goals in mind:
Goals for this assignment
1. To write a research paper.
2. To conduct research on the chosen topic.
3. To provide details of the topic in an organized manner.
4. To provide a chronological perspective of how the issue(s) of ethical behavior, of each Company, came to exists, the consequences of the choices made by major players, and the results or actions to remedy malfeasant behavior.
Grading Criteria
I will grade according to the following:
? You must thoroughly explain the chronological perspective of how the issue(s) of ethical behavior, of each Company, came to exists, the consequences of the choices made by major players, and the results or actions to remedy malfeasant behavior.
? APA formatting is required. Minus one letter grade for not using APA format. Please use the template provided.
? You must have a cover page, introduction, and body with in-text citations,
summary, and reference page.
? Spelling and grammar count: Use spell-check
? Use complete sentences
? Paper needs to be double spaced
? No extra spaces between paragraphs
? No fonts larger then 12 point will be accepted
? No fancy fonts like handwriting, as they are hard to read. Please use a
standard college font like Times New Roman or something similar.
? Paragraphs must have at least 3 sentences in them but no more then 6.
? No one sentence paragraphs
? Use your own words
? All quotes must be in quotations and with references cited.
? Do not use large quotes. Tell me in your words and cite your source.
? You must use at least 3 references. Please use the LRC.
? You must use citations for every cite, every time you use
There are faxes for this order.
